Digital goods are described by the Colorado Department of Revenue as “sounds, images, data, facts, or information, or any combination thereof, transferred electronically, including but not limited to software, music, e-books, movies, and photographs.” This implies that you must collect sales tax from customers in Colorado if you sell any of these goods.
It’s significant to remember that different jurisdictions in Colorado have different tax rates for digital goods. For instance, you would be required to collect the 4.31% Denver sales tax if you sold a consumer a digital good in Denver. The Colorado Springs sales tax rate is 3.12%, therefore you would have to collect it if you were to sell the identical digital good to a consumer there.
How about software subscriptions, though? Are they subject to Colorado taxes? Yes is the second response. Sales tax must be gathered from customers who purchase software subscriptions in Colorado. Both one-time purchases and ongoing subscriptions fall under this category.
It’s important to remember that, depending on the circumstances, some digital goods may not be subject to sales tax. Sales tax might not apply, for instance, if you sell an e-book to a student for educational purposes. To find out if your specific digital commodity qualifies for an exemption, it’s crucial to speak with a tax expert.
In conclusion, companies who offer digital items in Colorado are required to collect sales tax. This also applies to software subscriptions, which are taxable. To make sure that you are in compliance with state and local tax rules, it is advised that you speak with a tax expert if you have any questions concerning the tax repercussions of selling digital items in Colorado.